U.S. appeals court to rehear case on health care subsidies

Ruling may avert showdown in Supreme Court

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WASHINGTON — The full U.S. Court of Appeals in Washington will rehear a case on Obamacare tax subsidies, granting a government request in a move that may reduce chances of a new Supreme Court showdown over a central part of the law.

A rehearing sets up the possibility that the full court will reverse the July ruling of a three-judge panel that blocked subsidies for consumers on federally run health exchanges, a key element to the 2010 health care overhaul. Another U.S. appeals court, in Richmond, Va., upheld the provision’s application to federal exchanges.

Eliminating the split would reduce the chances of the Supreme Court’s taking the case. Divisions between appeals courts are among the factors the justices consider when deciding whether to hear a case. In a short order Thursday, the Washington appeals court set aside the July ruling and scheduled new arguments for Dec. 17.

“If the government wins, you have certainly reduced the likelihood of Supreme Court review, no question,” said Jonathan Adler, a law professor at Case Western Reserve University in Cleveland, who co-wrote a brief in support of plaintiffs in the case seeking to restrict the subsidies.

Supreme Court review is “very unlikely” if the Obama administration prevails at the rehearing because justices rarely review “a decision upholding a rule without a circuit split,” said Timothy Jost, a health law professor at Washington and Lee School of Law in Lexington, Va.

On the other hand, the Supreme Court may feel obligated to tackle the Patient Protection and Affordable Care Act of 2010 once more simply because of the issues at stake, according to Tom Goldstein, an appellate lawyer whose Scotusblog website tracks the court and is sponsored by Bloomberg Law. While the likely result of a rehearing will be a win for the Obama administration, “the issue is so significant and close that it ultimately is likely to be decided by a more conservative Supreme Court,” Mr. Goldstein wrote in an e-mail.

The question before the appeals court involves tax subsidies that apply to more than half of the 8 million people who picked an insurance plan from October through mid-April, according to a report by the U.S. Department of Health and Human Services. The dispute centers on whether the subsidies, in the form of tax credits, apply only to consumers in the 14 states that have set up Obamacare insurance marketplaces or to the much larger number who buy insurance on the federal marketplace.

The Obama administration asked the full court to rehear the case after the three-judge panel struck down the Internal Revenue Service rule specifying that needy customers in both the federal and state marketplaces were eligible for the subsidies. Hours after that July ruling, a federal appeals panel in Richmond unanimously upheld the IRS rule.

The decision to rehear the case underscores the influence of four judges appointed to the court by President Barack Obama since 2013. Three of them took their seats after Senate Democrats changed the rules to let a simple majority confirm most presidential nominees. Long dominated by Republican appointees, the Washington appeals court now has seven judges who were nominated by Democratic presidents and four named by Republicans.

Two other judges who have taken semi-retired senior status, Democratic-appointed Harry Edwards and Republican-appointed A. Raymond Randolph, have the option of taking part in the rehearing because they were on the three-judge panel. Judge Edwards dissented.


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